The diversified agribusiness, based in Perth, has been aggressively expanding in the past few years, including a $20 million deal to buy Jade Tiger Abalone business in Victoria last month.

The company, which owns Linley Valley Pork and processes 98 per cent of Western WA’s pork, is eyeing deals across the country as it continues to build scale to boost earnings.

Craig Mostyn Group chief executive
David Lock
wants to improve returns for the three families that own the company, who are descendents of founder Robert Mostyn.

Mr Lock played down the likelihood of a float of the business, but said it was likely that external investors would need to be brought into the business to fund future growth. “Initial public offerings of agri [businesses] tend to be very difficult. They tend to not add value to shareholders," Mr Lock said.

“When I look at our five-year plan it is unlikely that we would seek an IPO in that period of time. But I think an ultimate change away from purely solely family ownership is the most likely way of us raising capital in the long term."

Leverage first

Just one family member, Andrew Mostyn, is involved in the day-to-day operations of the company. The families are reluctant to tip capital into the business but Mr Lock said the company was not currently soliciting third party investment. “The best way for us to add value to our shareholders is to leverage the company first and then, when we have got the earnings up, to seek other capital," Mr Lock said. “Then we would be bringing in other capital to the group when it was at its most valuable." Mr Lock has found competition for assets intensifying as investors around the world look to cash in on Asia’s surging demand for food. He wants to make one more large acquisition, worth up to $50 million.

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Company Profile

Mining billionaire
Gina Rinehart
paid $40 million for a half share in two Kimberley cattle stations earlier this month. The deal came not long after Mr Lock missed out on buying WA’s biggest beef producer Harvey Beef, which was snapped up by
Andrew Forrest
’s Minderoo Group in May for more than $30 million. “We were gazumped at the last minute by deeper pockets," Mr Lock said.

Mr Lock had been negotiating with previous Harvey Beef owners Pacific Alliance Group for six months, negotiating an unconditional deal with an agreed price. But two days after the deal was supposed to be finalised he was sent a one-sentence email explaining that the business had been sold to another party.

“I never heard from them again. I didn’t even get a phone call. It was extraordinary," Mr Lock said.

Dangerous ground

While he welcomed fresh investment, saying it could improve efficiencies and boost Australia’s export potential, it has made buying assets more competitive.

“It’s a dangerous playing ground now with a couple of billionaires stomping around," Mr Lock said.

Since Mr Lock joined as chief executive in 2004, he has sold off disparate businesses, including fibre glass roof sheeting and plastic lattice companies, to focus on agriculture. He moved the company’s head office from Sydney to Perth, to concentrate on its large pork and rendering assets.

“The initial strategy was to reduce turnover and increase profit," Mr Lock said. “We shed a lot of businesses. The turnover has been reasonably static until the last few acquisitions we have made in the past year."

Turnover has risen from about $280 million to $350 million. Mr Lock wants to grow the company’s return on equity from 14 per cent to 18 per cent.

He said the business could reduce earnings volatility by varying investments within the agriculture sector, highlighting its pork processing business and its rendering operations were counter cyclical.

“As we make acquisitions we look to try and find businesses that have different risks," he said.

Mr Lock said the nation’s agriculture industries should not repeat the mistakes of the mining industry by simply producing commodities for export.

“My view of meat processing in particular is that we need to focus on the domestic market and value add as much as we can here rather than exporting commodities," Mr Lock said.

“While I accept that the live export business is an important part of Western Australia’s agriculture, I would much prefer to see us ultimately get to a point where all of those animals are processed onshore. We should create jobs, create value in Australia and then the value added product is exported."

He said this should be the nation’s ambition as developing countries improve their supply chains.